Technical analysis is one of the most valuable methods used when analyzing financial markets. However, there are some points to be considered when performing technical analysis, otherwise your trading as a result of technical analysis may cause you to lose as a result of your trading. Every mistake made in the process of learning to do technical analysis contributes to your learning process, but it is in your best interest to avoid these mistakes as much as possible. In the continuation of this blog post, we will talk about the 7 most common mistakes made in technical analysis. You can also read the 5 Best Cryptocurrencies You Can Buy and Sell blog, which we have prepared in detail before. You can have more detailed information on crypto coins.
1) Protecting Capital
When starting to trade, the priority should be to protect capital rather than make money. Therefore, it would be a correct strategy to start trading with smaller amounts at the beginning and to increase the capital after you start making money on a regular basis.
Using stop-limit orders when trading can be the right strategy to reduce losses. A trader may not always be able to trade correctly, so using a Stop Limit Order to keep the loss to a minimum when he makes the wrong choice will be a very right move for traders.
2) Not Buying and Selling Often
It can sometimes take a long time to wait for the signal to be able to trade, as in this case, trading just to have traded without receiving the signals can lead to a loss for the trader. Therefore, waiting patiently until you receive the right signals can lead to a more successful investment point.
Technical analyzes made by considering a wider time interval give very accurate reliable results compared to technical analyzes made by considering a shorter time interval. Technical analyses performed over short time intervals have a more chaotic environment and therefore have a lower risk/return ratio. Therefore, short-term investing is a riskier investment strategy and is generally not recommended for beginner investors.
3. Buying and selling revenge
Trading with sudden and emotional decisions after big mistakes can lead the trader to make bigger mistakes. Trying to quickly recoup the damage is called buying and selling revenge. In such cases, it is important to think analytically, avoiding emotional decisions.
Maintaining calm instead of buying and selling revenge after a big loss, continuing trading with a better psychology after not trading for a while, will be much more beneficial for the investor.
4) Being too stubborn to change your mind
The way to be a successful investor is not to be afraid to change your mind. Especially in more volatile markets such as crypto money markets, conditions can change at any time. Adapting quickly to changing conditions and changing and adjusting the investment plan accordingly is one of the key points of being a successful investor. Thinking and researching plans that are the opposite of the current investment plan can be a very effective method in understanding the deficits of the current plan. Therefore, sticking to a single plan in investments may not lead to positive results, it will always be more useful to think about a better plan.
5) Ignoring unusual market conditions
In some cases, technical analysis may become less reliable. In these unusual cases, continuing to trade by adhering completely to technical analysis can lead to great losses for the investor. For example, if the RSI (Relative Strength Index) value is below 30, it means that sellers are more dominant in the market, which is an indicator that it is in a downtrend. In some cases, the RSI value may approach the extreme, i.e. zero, but this does not indicate that the ascending trend will be crossed again, so trading in such cases can lead to a big loss for the trader. Therefore, the investor should not stick to a single indicator and ignore these unusual conditions.
6) Forgetting that technical analysis is a game of probability
Technical analysis, no matter how experienced it is, no matter how successful an analysis is, never provides precise data, even if it offers results with very high probability, it is never certain. Investing only according to technical analysis can lead to a loss for the trader.
7) Blindly following other investors
Every investor has his own investment plan. You may find that even successful traders have different investment strategies from each other. Therefore, even if you want to get ideas from other investors, you need to choose the most suitable one for you. However, making the investments that another investor says may not always be a win. Every investor should have their own plan and evaluate the recommendations of the investors they follow to this extent.
